introduction / my niche $500-$2k in a week.

Originally Posted by rahe01

The idea behind that thread is that when i move further away from the town the scrap prices paid decrease. The scrap yards closer to CBD pay better rates but are owned by giants and all the smaller suburban and country scrap yards buy with slightly lover rates and sell to these giants who in turn export all their metals. now the rates these giants pay are about third lower than london metal exchange prices(even half lower for aluminium) I all ready found a local aluminium end buyer for a decent price

The further away you are, the higher your transportation prices are going to be. Also, the longer it will take to move your scrap. Longer time to move stuff means you are open to price fluctuations more (if you arent working of a contract and just selling by weight to someone else), so there is more risk. Further out places also probably are less populated and thus have less volume than larger places. In this business its all about volume so these combined reasons are probably why further out places can only pay what they are paying.

Originally Posted by rahe01

What im trying to figure out is whether LME prices are actually what end users pay for the metal? if thats the case i could easily top these giants prices by 15% and still make another 15% in process. Still i know little enough about export to be afraid of losing 20% in my first deal.

I am 99% sure you cannot top the giants. They have economies of scale working for them.



Metals markets work like the stock markets (kind of). They are futures, but it is similar. There are bids, and there are asks. If you are someone with a bunch of scrap (like the giants) you can put out an ask price. For example, lets say I am one of the giants. I have 1000Tons of copper.... I can then sell futures against my commodity. So I can say as the giant "I am going to sell 100T of copper to be delivered to Y, 1 month from today, for $X".... And people that need 100T of copper can bid or purchase that contract.

For you to be able to enter the lme market, I think you need to have a few things:

As a seller:
Ownership of a lot of metal
A way to move all of it cheaply

As a buyer:
A lot of money
A way to take delivery of the metal
A place to store the metal


I think you may be in over you head thinking you can just show up to the LME and somehow make out better than established companies that have probably been doing this for many years and who probably have much more resources than you do.

Edit: in regards to "whether LME prices are actually what end users pay for the metal?"

The answer is yes. Someone is paying some price at some time, but it fluctuates. Thats why the futures and options exist. They are contracts between 2 entities. If you have scrap to get rid of you can sell futures or options against it.

You also have to take into account the risk of all of this. By just selling it to someone like a scrapyard you remove all the risk from yourself, and pass it along to them. If you sell to a scrap yard for $x/ton and then the next day the market tanks, they could end up losing money. The same could happen to you if you do something like buy a bunch of it up from people with the intention to resell on the LME. You could fork out $100k on buying it all up and then when you go to sell it it only be worth $50k. Or something like that. There is a lot that goes into all of it and the scrapyards, brokers, and people on the exchange make their money buy knowing all the variables and even knowing all of the variables still sometimes get burned.